Investec Asset Management Reduces Risk After Market Rally

Investec Asset Management has
reduced its holdings in risk assets on a so-called tactical
basis amid signs the market is starting to look overbought and
may soon consolidate.

Philip Saunders, who helps oversee more than $100 billion
as head of multi asset, said while the fund manager remains
materially overweight the asset class, it is right to “take the
edge off that exposure” in the short term.

“We have been punchy in terms of investing on a strategic
and tactical basis since last summer,” Saunders said at a media
briefing in London today. “There are a lot of measures that
tell us that the market is looking pretty overbought and that
tells us that there is going to be some kind of consolidation or
a setback.”

The Standard & Poor’s 500 Index (SPX) has climbed 5.3 percent so
far this year to close above 1,500 last week for the first time
since 2007, as U.S. lawmakers agreed on a compromise budget,
avoiding the automatic tax increases and spending cuts that had
threatened the economy. The benchmark Stoxx Europe 600 Index (SXXP) has
climbed 3.5 percent during the same period.

Saunders said the market is now moving into the expansion
phase of the cycle and if it can consolidate in the short term,
it will resume its upward trajectory.

“If the market suffers the kind of correction it has
suffered over the last couple of years then all bets are off,”
Saunders said from Investec’s London office. “If it consolidate
and the short-term sellers like ourselves get absorbed by
longer-term buyers, then I think the stage is set for this phase
to continue.”

Market Rotation

John Stopford, co-head of fixed income and currency at
Investec, said the rotation into equities from bonds was more
evident among retail investors than institutions.

“At the margins, it is happening and in some of the
faster-moving parts of the market it has started,” Stopford
said at the briefing. Investors’ motivation to consider equities
had increased, he added. “Whether it’s in the next six months
or 12 months? I can’t answer that.”